Firm Growth through New Establishments

Dan Cao, Erick Sager, Henry Hyatt and Toshihiko Mukoyama
Additional contact information
Dan Cao: Georgetown University
Erick Sager: Federal Reserve Board

No 1484, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: This paper analyzes firm growth along two margins: the extensive margin (adding more establishments) and intensive margin (adding more workers per establishment). We utilize administrative datasets to document the behavior of these two margins in relation to changes in the U.S. firm size distribution. Between 1990 and 2015, we find that the significant increase in average firm size was driven primarily by the expansion along the extensive margin, particularly in superstar firms. We develop a general equilibrium model of endogenous innovation that features both extensive and intensive margins of firm growth. We estimate the model to uncover the fundamental forces that caused the changes over this time period through the lens of our model. We find that, over time, the cost of innovations that lead to new establishments has declined for firms who are innovative in that dimension. Meanwhile, the duration that a firm can enjoy high growth through such innovation became shorter, and firm entry became more costly.

Date: 2019
New Economics Papers: this item is included in nep-bec, nep-com, nep-dge, nep-ent and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Related works:
Working Paper: Firm Growth through New Establishments (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:1484

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